Europe's failure to share the burden of hosting the huge refugee populations faced by developing countries is shameful and pound-foolish, the head of the UN's refugee agency says today.

Tony Blair last night failed to win agreement for EU funding for the UN's plan to set up "zones of protection" in global trouble spots, but Britain is expected to go ahead with the scheme together with like-minded member states, officials said.

Mr Blair, who with backing from Denmark, Austria and the Netherlands, wanted the first EU pilot scheme to be launched in east Africa, probably for refugees fleeing war and famine in Somalia, will also today tell fellow leaders at the EU summit in Greece that Valéry Giscard d'Estaing's draft constitution for the union is a "good basis" for negotiations between governments.

Writing exclusively in the Guardian today, Ruud Lubbers, the UN's high commissioner for refugees, says the amount spent on refugees in their region of origin is so woefully inadequate that it is little wonder they head for Europe.

"Their original hosts, with inadequate financial support, are unlikely to encourage them to stay. Nor are they likely to welcome them back, just because Europe doesn't want them either."

Mr Lubbers says the scheme will mean donor states supporting refugees in their original host countries, helping them to return home, to resettle to other countries, or start new lives locally.

He says such a major flow of development assistance will increase the self-reliance of refugees and benefit the host countries, so reducing pressures to seek asylum further afield.

British ministers also hope this will reduce refugee flows and curb asylum abuses."By setting this up you offer people refuge and a safe haven close to where they live, so it's easier to get there and get home again if the situation improves," one official said.

The scheme also recognises the vast majority of the 12 million refugees in the world remain in regions close to the country of origin, often supported by the UNHCR.

Britain has dropped its more controversial idea of setting up refugee transit processing centres on trafficking routes into Europe, because of objections from Germany and Sweden.

Twelve British refugee and human rights organisations last night wrote to Mr Blair voicing concern at British backing for the UN plan: "These proposals will be seen as shifting responsibility for asylum seekers and refugees to some of the poorest countries in the world and send a dangerous signal about the UK's commitment to human rights," said Margaret Lally of the Refugee Council. "The safety of 'safe havens' has frequently been called into question," the letter says.

The stakes will be high for Mr Blair today when he meets the president of the Brussels convention. The constitution is designed to simplify and clarify EU decision-making and powers, before 10 states join next year, bringing its total population to 450 million.

No other EU country has had Britain's tabloid-driven debate on a "blueprint for tyranny", though France, Spain and Ireland have objections to some proposals.

The prime minister flew to Salonika determined to demonstrate the low-level significance he attaches to discussions on the constitution by returning to London this afternoon, half a day ahead of his fellow summiteers.

Mr Giscard's text has the legitimacy of having been drawn up by the 105-member European convention, though the last word rests with governments when they negotiate a new EU treaty.

The prime minister and the foreign secretary, Jack Straw, have led cabinet colleagues and officials in a resolute effort to make light of the laboriously negotiated draft. Mr Blair is playing it cool to demonstrate his confidence that no fundamental changes are at stake - and that the referendum demanded by Iain Duncan Smith and the Tory press is not needed.

This morning's summit session with Mr Giscard is likely to welcome his draft before the real haggling resumes behind closed doors in autumn.

It is then that countries with objections will try to change those parts of the constitution they do not like.

Leaders will also try to repair some of the damage caused by the Iraq war by approving a new EU security doctrine, urging closer cooperation with the US to deal with weapons of mass destruction and terrorism.

"The EU should be ready to share in responsibility for global security," says the document, written by Javier Solana, the EU's foreign policy chief.

Tomorrow the leaders meet their counterparts from five Balkan countries - Croatia, Albania, Serbia-Montenegro, Macedonia, and Bosnia - to encourage them to pursue reforms to enable them to join the EU some day.